Saudi Arabia's STC first quarter profit climbs 6.3% as revenues surge

Telecom operator will recognise financial impact from its 8.8 per cent stake in Careem when the deal is finalised

Saudi Telecom Company reported a 22 per cent drop in fourth-quarter net profit. Waseem Obaidi for The National 

Saudi Telecom Company, the biggest telecommunications operator in the kingdom, reported a 6.3 per cent year-on-year rise in its first quarter net profit as revenues surged.

Net income for the first three months ending 31 March, climbed to 2.75 billion Saudi riyals (Dh2.7bn), STC said in a statement to Tadawul stock exchange, where its shares are traded. The quarterly profit beat Egyptian investment bank EFG Hermes’ profit forecast on the back of a better-than-expected earnings before interest, taxes, zakat, depreciation and amortization (Ebitda) margin.

STC’s first quarter Ebitda climbed to 5.4bn riyals, an increase of 19 per cent, while its revenues advanced 8.4 per cent to 13.4bn riyals, it said

The company, which owns a stake of about 8.8 per cent in ride hailing company Careem, said no financial impact was recorded during the first quarter after Uber Technologies agreed to buy Careem in a $3.1 billion (Dh11.39bn) deal that will allow the technology platform to remain independent.

STC said the final impact of the deal will be recognised upon the completion of regulatory procedures and requirements.

“What has been achieved in this quarter …. was a result of our commitment to implement and achieve STC’s strategic plans,” Nasser Al Nasser, STC group chief executive, said. “Part of the company's strategy is to invest in new and diverse domains that can enable the digital transformation and enrich the customers’ experience”.

STC’s quarterly operational profit surged more than 24 per cent to 3.3bn riyals. While consolidated revenue increased by 1.4bn riyals, the cost of services increased by 68 million royals, which resulted in a 969m riyals increase in gross profit.

The telecoms operator reported a 326m riyals rise in operating expenses during the first three months of the year, mainly on the back of an increase in the general and administration expenses by 245m riyals. Its selling while marketing expenses, however, decreased by 135m riyals.

It also recorded a loss 287m riyals on account of “other income and expenses" compared to a gain of 224m riyals for the for the same period last year, mainly due to a 150m riyals cost of early retirement program.

The increase in finance cost by 67m riyals and a loss 126m riyals at the end of the first quarter of 2019 compared with a net gain of 94m riyals on other income also dented profitability.